Recent years were dominated by concern that the Chinese economy faces a ‘hard landing’ as growth began to slow. But the country is now expected to meet its 7.5% GDP growth target for 2012.
Indicators to be released in the coming month are expected to show the economy is gathering speed after suffering seven consecutive quarters of slowing growth. Recent manufacturing data also provided evidence that activity is picking up.
However, Capital Economics’ chief Asia economist Mark Williams and China economist Qinwei Wang do not expect growth in the world’s second largest economy to improve substantially over the coming few years.
The economists noted that China’s exports could suffer if the eurozone crisis continues and growth on the global stage remains weak. In addition, Chinese growth is unlikely to be driven by real estate investment as in the past, owing to the government keeping most of its property market controls in place.
“In these circumstances the current pick-up in China’s growth will only continue if the government introduces further stimulus,” the macroeconomic forecasting consultancy added.
“While the transition to a new leadership has introduced new uncertainties, policymakers seem content with the current pace of growth, particularly given that the labour market is healthy. Many also recognise that further efforts to stimulate the economy would heighten the risks of overinvestment.”
Capital Economics said the current trajectory suggest China’s economy will grow by 8% in 2013, which is broadly in line with the current market consensus.
But the consultancy differs from other commentators, including the International Monetary Fund and the Organisation for Economic Co-operation and Development, which expect Chinese to accelerate further in the following year.
However, Williams and Wang said: “Expectations that China’s growth will continue to accelerate through 2013 are likely to be disappointed. We foresee GDP growth dropping back to 7.5% or so [in 2014].”
